Why insurers’ managed repair programs can be problematic

From a fire or a broken pipe to a falling tree or a hurricane, when an unforeseeable event causes serious damage to a person’s home they are understandably unnerved by the experience and anxious about what happens next. The good news for many, though, is that their homeowners’ insurance will likely cover the damage, such that their most prized possession — both financially and personally — will be restored to its former state.

Unfortunately, a growing number of people are now reporting problems with insurance companies living up to the promises made in their policies thanks to what are known as managed repair programs.

In general, managed repair programs are initiatives whereby insured homeowners in need of repairs are either presented with a list of approved contractors from which to choose by their insurance company or have the contractor selected for them.

While insurance companies with managed repair programs tout them as providing homeowners with both cost savings and peace of mind in that they won’t have to deal directly with contractors — and the possibility of associated fraud or slipshod work – many are reporting largely negative experiences.

Indeed, recent reports have found that many homeowners enrolled in these managed repair programs saw their insurance companies retain the services of contractors who were often late or failed to show up, performed shoddy work, used poor quality materials and/or took far too long to complete projects.

The reason behind these nightmarish experiences, say experts, is that both the insurance company and the contractor benefit from keeping the cost of the claim low. For the former, smaller claims means more money for shareholders, while for the latter, smaller claims means more insurance-related work.    

Compounding the problem, they argue, is that some insurers are even using affiliated contractors, such that they stand to make significant money by going with whatever is cheapest.

This naturally raises the question as to what, if anything, homeowners can do to protect themselves from being enrolled in a managed repair program, which are currently used by five of the largest 25 insurance companies here in Florida.

The simple answer, say experts, is to simply read the terms of a prospective policy, looking for red flag terms like right to repair, preferred vendors and, of course, managed repairs.

It’s also important for those homeowners who feel as if they have been victimized by any sort of deceptive practices or substandard efforts by contractors retained by their insurance company to understand that they have rights and options for seeking justice.